Privatising Network Rail: A £10 billion ticket to disaster

Our new report - covered in the Mirror - explains how much the plan could cost us over the next ten years and makes the case that break up and sell off is short-sighted from a financial point of view.

The options being considered include Network Rail selling its largest railway stations, parts of the commercial estate, the power assets and the telecommunications assets. The government is also looking at options for private companies to manage the railway tracks on different parts of the network. Network Rail itself has agreed with the government to sell off some of its assets, and believes it can raise £1.8 billion from the sales. 

The plans being considered would make the railway worse, not better, for two reasons. Firstly, the assets being sold off have the potential to provide an ongoing source of income. Selling them off will mean we lose out on long term revenues into the future. Secondly, these assets are crucial to the operation of the railway and selling them off would be hugely complex, risky and in the long run, more expensive. Our report, written by Transport for Quality of Life, analyses the financial consequences of the sell-offs being proposed.

Network Rail sell-offs would cost us £10 billion over ten years

This includes:

• £1.1-£1.7 billion in one off set up costs (including financial advice, legal fees, under-valuation)
• £3.4-£3.8 billion over ten years in fragmentation and transaction costs (including higher interest payments, dividends to shareholders, sub-contractor profit margins, contractual arrangements, project cost over-runs)
• £3.9 billion over ten years in lost opportunities for income (revenue from stations, renting out commercial property and telecoms spare capacity)
• £1 billion or more of failure and exit costs (buying back commercial debt, administration costs)

A better way to fund the railway

Network Rail has a funding problem, not a financing problem. All the financing ‘solutions’ on the table will cost more in the long run. This report suggests three ways to tackle Network Rail’s funding problem:

• Fair taxes – those who benefit from the railway would make a contribution to improving it. This could include rail improvements being financed by taxing the uplift in property value they produce, a payroll tax on employers close to railway stations and a tax for motorists who benefit from less congestion.
• Cutting wasteful expenditure – a unified, publicly owned railway (created over time as franchises are brought in-house) would save money (around £1.2 billion a year).
• Better accountability – channelling public funding via regions and cities to make sure they get the rail improvements they need for their economies to thrive.

The proposed sell-offs are a short term fix. Although they would raise some cash up-front, the long-term effect would be to increase the complexity and cost of running the railway, and this additional cost would have to be paid by passengers and taxpayers. Network Rail as a publicly owned body has a responsibility to run the railway for the benefit of passengers and taxpayers, today and in the future. Breaking up the railway and selling off its profitable assets is a risky, costly experiment that we cannot afford.

16,000 people signed our petition against these plans - we're currently waiting to hear back from Mark Carne, chief executive of Network Rail. Watch this space.

Read the full report: